Interpreting the Effects of Business Transactions
Six transactions of Prosperity Company, a corporation, are summarized below in equation form, with each of the six transactions identified by a letter. For each of the transactions (a)through (f)write a separate statement explaining the nature of the transaction. For example, the explanation of transaction (a)could be as follows: Purchased furniture for cash at a cost of $800.
| Assets | = | Liabilities | + | Owners’ Equity | ||||||||
| Cash | + | Accounts Receivable | + | Furniture | + | Building | + | Land | - | Accounts Payable | + | Capital Stock |
Balances | $ 9,000 |
| $30,000 |
| $10,000 |
| $90,000 |
| $40,000 |
| $30,000 |
| $149,000 |
(a) | -800 |
|
|
| +800 |
|
|
|
|
|
|
|
|
Balances | $ 8,200 |
| $30,000 |
| $10,800 |
| $90,000 |
| $40,000 |
| $30,000 |
| $149,000 |
(b) | +500 |
| -500 |
|
|
|
|
|
|
|
|
|
|
Balances | $ 8,700 |
| $29,500 |
| $10,800 |
| $90,000 |
| $40,000 |
| $30,000 |
| $149,000 |
(c) | -3,000 |
|
|
| +5,000 |
|
|
|
|
| +2,000 |
|
|
Balances | $ 5,700 |
| $29,500 |
| $15,800 |
| $90,000 |
| $40,000 |
| $32,000 |
| $149,000 |
(d) | -2,000 |
|
|
|
|
|
|
|
|
| -2,000 |
|
|
Balances | $ 3,700 |
| $29,500 |
| $15,800 |
| $90,000 |
| $40,000 |
| $30,000 |
| $149,000 |
(e) | +10,000 |
|
|
|
|
|
|
|
|
|
|
| +10,000 |
Balances | $13,700 |
| $29,500 |
| $15,800 |
| $90,000 |
| $40,000 |
| $30,000 |
| $159,000 |
fl) |
|
|
|
| +3,000 |
|
|
|
|
| +3,000 |
|
|
Balances | $13,700 |
| $29,500 |
| $18,800 |
| $90,000 |
| $40,000 |
| $33,000 |
| $159,000 |
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